Reference no: EM132735378

Assume that Macrohard has started its operations and is doing fairly well. However, based on some market research about economic demand curves and price sensitivity, Macrohard is considering lowering its price to $20.

Problem 1: What is the incremental break-even volume as a percentage of the old no. of units?

Problem 2: Explain whether or not this incremental level of sales appears feasible. Hint: Gross Margin % is the same as Unit Margin %.

Given info which may or may not be needed:

Breakeven volume at the previous price of $25 = 1 Million units

Price wholesaler sells would be $27.50 at a 10% markup

Retailer selling price would be $31.625 at a 15% markup

The electronic circuitry costs $7.50

CORNING supplies the screen for $3.75

Battery costs $1.25

Additionally, the cost of a fabrication facility is $8.5 million

Macrohard estimates that it will need to spend $2 million on sales and marketing expenses in order to achieve its objectives

And $2 million on general and administrative expenses.